You are considering purchasing a laundry-mat.  The venture is expected to last 10 years.  The following information is available:

Year 1 estimated financial statements are provided in Schedule A

Sales will grow by 10% per year for the first 5 years, and then grow by 1% per year starting in year 6.

All costs are variable, with the exception of depreciation which isstraight lined over 10 years.

Washers and Dryers costing $400,000 will be purchase immediately.  These appliances have a salvage value of $50,000 at the end of their useful life.

On the very last day of year 5, all of the washers will require a major overhaul at a cost of $80,000.  The purpose of this overhaul is to restore the equipment to its original condition, and the overhaul will not extend the life of the equipment or change its salvage value.

$20,000 in cash and inventory needs to be kept on hand at all times.

Tax rate is 25%.  Other tax information is in Schedule B.

The investor is also considering another investment that will generate after-tax income of 10%

Required:  Calculate the Net Present Value of this project.

Answer rating: 100% (QA)

To calculate the Net Present Value NPV of the laundrymat project we need to discount all the expected cash flows to their present value and then sum t... View the full answer